Blog: Dave LeggettThe 'Honda problem' for David Cameron

Dave Leggett | 11 December 2012

The UK's relationship with continental Europe has, through the ages, not always been an easy or harmonious one.

The strong economic driver occasionally bumps up against the political dimension and that's when things get tricky. The EU may be in something of a mess, the single currency eurozone project with its dysfunctional family of nations lurching from one crisis to another, but the UK cannot ignore what goes on in Europe. Huge levels of trade take place and the eurozone economy is a vital destination for UK exporters. 

For British politicians, there's a big dilemma. The EU is not popular. Newspapers glory in highlighting Brussels' apparently needless interference in our daily lives. Europe's problems are constantly in the news. The promised economic gains appear to have gone missing. And not joining the euro currency is surely vindicated by the ongoing crisis for that currency isn't it? Well, yes, we do have control of our monetary policy, but it is something of a double-edged sword. The problems of the euro stem from divergent economic policies across nations and a lack of mechanisms to properly converge, in economic terms, with a commensurate degree of accountability. If that is eventually addressed, as it must be, it means the eurozone currency nations will get closer, economically and politically. In this scenario, Britain is potentially marginalised as the eurozone countries forge a closer economic policy between themselves. Banking rules – and a proposed financial transactions tax - is one area that has got British government attention amid signs that the 'eurozone club' has been forming a view very different to Britain's (informed by the greater importance of financial services to the UK economy: no transactions tax).

An EU constituted more along the lines of the trading bloc and Single European Market of the early 1990s might now be out of reach if a single currency is to be retained (and even with the immense pressures of the past year, the political will to break it up seems to be absent amid worries that outcomes could be even worse). 

Where might Britain be heading, in terms of its relationship with the EU? A referendum on EU membership in the next parliament (after 2015) is looking increasingly likely. A decision to exit is possible. Could Britain be like Norway and abide by EU regulations but stay outside the EU? (Norway, by the way, pays in to the EU budget more per head than the UK does.) The drawback for Norway is that, as a non-member, it has very little influence on policy-making inside the EU. So it stays 'independent', signs up to everything the EU does, but has no say in policy formulation. And some commentators say that the Swiss model of bilateral agreements with the EU and being able to pick and choose regulations would not be practical (or allowed by the club) for a big country like the UK.

What about future investments in Britain by multi-national companies? The Japanese car companies  spring to mind; they invested here for a host of reasons, but access to the EU market from a production facility situated inside the EU was high up on the list. They wouldn't leave overnight, but there could be a long-term shift of investment elsewhere.

This blog from the BBC's political editor highlights the 'Honda problem' and the dilemmas for the UK's prime minister currently. He has to be careful what he says and it's something of a politician's nightmare to get it right. He has a fine line to tread in terms of the debate as it is currently framed. I'd imagine the economic arguments will become very much more important in the debate and campaigning ahead of a future referendum.

'Back off Brussels!' was the populist refrain of comedian Al Murray's alter ego 'The Pub Landlord'. Perhaps it could be supplemented: 'Back off Brussels, so long as you don't take any jobs with you.'

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